ACC 2020 Chapter 4

29.) Given total fixed overhead of $100,000, budgeted machine hours of 4,000 and capacity machine hours of 50,000, the predetermined overhead rate based on capacity is ___ per machine hour

$100,000/$50,000= $2 per machine hour

30.) Cost of goods manufactured equals $410,000; finished goods inventory was $110,000 at the beginning of the period and $125,000 at the end of the period. Overhead was underapplied by $12,000. Adjusted cost of goods sold is:

$110,000 + $410,000 -$125,000 + $12,000 = $407,000

9.) Jones company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor cost to manufacture 7,500 units. The unit cost of Job #420 is:

$2.00 Total cost of Job #420 = Direct Materials + Direct Labor + Predetermined overhead rate x Direct labor cost = $4,000 + $5,000 + 120% x $5,000 = $15,000 Unit product cost = $15,000/$7,500 = $2.00 per unit

50.) Given the following calculate cost of goods manufactured: Direct materials $66,000; Direct labor $80,000; Applied overhead $60,000; Actual overhead $70,000; Beginning work in process inventory $27,000; Ending work in process $25,000

$27,000 + ($66,000 + $80,000 + $60,000) -$25,000 = $208,000

14.) Meep Industries had unadjusted cost of goods sold of $300,000. Overhead was overapplied by $20,000. Adjusted cost of goods sold is:

$300,000 - $20,000 = $280,000

32.) Carlisle, Inc. had Sales of $500,000, Cost of goods sold of $400,000, and Selling and administrative expenses of $50,000. Gross margin is:

$500,000 - $400,000 = $100,000

34.) Estimated manufacturing overhead $500,000 Estimated direct labor cost $250,000 Actual manufacturing overhead $720,000 Actual direct labor cost $300,000 Based on the information presented above, the predetermined overhead rate per direct labor dollar is

$500,000/$250,000 = $2 per direct labor dollar

23.) Which of the following statements are true? Check all that apply - Traditional absorption costing may use activities not related to volume of production - Activity-based absorption costing may use activities not related to volume of production - Traditional absorption costing only uses activities related to volume of production - Activity-based absorption costing only uses activities related to volume of production

- Activity-based absorption costing may use activities not related to volume of production - Traditional absorption costing only uses activities related to volume of production

33.) Which of the following statements are true? Check all that apply - Direct labor costs flow through the Raw materials inventory account - Raw materials inventory represents the cost of materials not yet used in production - Raw materials inventory only includes the cost of direct materials - When materials are purchased they are recorded in the Raw materials inventory account

- Raw materials inventory represents the cost of materials not yet used in production - When materials are purchased they are recorded in the Raw materials inventory

43.) Which of the following information is contained on a time ticket? (Check all that apply) - The nature of indirect tasks worked - The amount of time spent on each job - The job number of jobs worked on - The materials used on each job worked

- The nature of indirect tasks worked - The amount of time spent on each job - The job number of jobs worked on

18.) Widely used allocation bases in manufacturing are: Check all that apply - non-manufacturing costs - machine hours - product revenue - direct labor costs - direct labor hours - units of product

- direct labor costs - direct labor hours - machine hours - units of product

31.) Job-order costing: (check all that apply) - works well in manufacturing firms but not well in service firms - is best used in companies that only provide a single good or service - may be used in almost any type of organization - is a widely used costing method

- may be used in almost any type of organization - is a widely used costing method

11.) In order to adjust Cost of Goods sold to reflect actual rather than estimated overhead costs (check all that apply): - overapplied overhead is added to cost of goods sold - overapplied overhead is deducted from cost of goods sold - underapplied overhead is deducted from cost of goods sold - underapplied overhead is added to cost of goods sold

- overapplied overhead is deducted from Cost of Goods Sold - underapplied overhead is added to Cost of Goods Sold

4.) A normal costing system applies overhead by job by multiplying a(n) ________________ _______________ rate by the _____________ amount of the allocation base incurred by the job.

-Predetermined -Overhead -Total

47.) The unit product cost is the same as the: (Check all that apply) - average product cost per unit - cost that would be incurred if another unit were produced - total job cost divided by number of units - incremental unit cost

-average product cost per unit -total job cost divided by number of units

36.) When preparing financial statements in job-order costing system, finished goods flow first to the ____________ ____________ and then to the ______________ _____________.

-balance -sheet -income -statement

10.) What methods can be used to dispose of underapplied or overapplied manufacturing overhead?

-closing it out to cost of goods sold -allocating it among work in process, finished goods, and cost of goods sold

49.) A materials requisition form contains the: (Check all that apply) - quantity of each direct material needed to complete a unit of product -job that will be charged for the cost of the materials -type of each direct material needed to complete a unit of product -type of materials to be drawn from the storeroom -quantity of materials to be drawn from the storeroom

-job that will be charged for the cost of the materials -type of materials to be drawn from the storeroom -quantity of materials to be drawn from the storeroom

15.)Murphy company has three departments, and uses a multiple predetermined overhead rate system. Department A manufactures parts in a highly automated process, then Department B assembles the parts by hand. Department C places completed units in a heat chamber to sterilize the before they are shipped out. Match each department with an appropriate overhead allocation rate. 1. Department A 2. Department B 3. Department C a. Direct labor hours b. Machine hours c. Batches

1. Department A - b. Machine hours 2. Department B - a. Direct labor hours 3. Department C - c. Batches

16.) Place these items from the income statement in the order in which they should appear: -Gross margin -Cost of goods sold -Net operating income -Sales -Selling and administrative expenses

1. Sales 2. Cost of goods sold. 3. Gross margin 4. Selling and administrative expenses 5. Net operating income

2.) The process used to assign overhead costs to products is called overhead __________.

Application (This is typically called overhead allocation.)

8.) Jones company uses a job-order costing system with a predetermined overhead rate of 120% of direct labor cost. The job cost sheet for Job #420 listed $4,000 in direct materials cost and $5,000 in direct labor on the job. What is the total cost of Job #420?

Cost of Job #420 = Direct Materials + Direct Labor + Predetermined overhead rate x Direct labor cost = $4,000 + $5,000 + 120% x $5,000 = $15,000

65.) Given the following, compute the cost of goods manufactured. Direct material cost: $40,000 Direct labor cost: $100,000 Applied overhead: $120,000 Beginning work in process inventory: $30,000 Ending work in process inventory: $12,000

Cost of goods manufactured = $30,000 + $40,000 + $100,000 + $120,000 - $12,000 = $278,000

66.) Which of the following statements is true? - Cost of unused capacity is a period expense - If all overhead costs are fixed, there will never be any cost of unused capacity -Total estimated overhead is the same whether the predetermined rate is based on budgeted activity or capacity

Cost of unused capacity is a period expense

13.) Labor costs that are easily traced to a job are called _____ labor costs.

Direct

60.) Which of the following is not required to calculate cost of goods sold using the indirect method?

Ending raw materials inventory

54.) True or False: Actual overhead costs appear in the Work in Process account but not on the job of the cost sheet:

False

64.) True or False: Job-order costing can ONLY be used in manufacturing firms.

False (Also used extensively in service industries.)

19.) Completed units that have not yet been sold are found in ____________ __________ inventory

Finished goods

62.) Given the following, calculate the cost of goods available for sale. Cost of goods manufactured of $234,000 Beginning Finished goods inventory of $18,000 Ending Finished goods inventory of $24,000

Goods available for sale = $234,000 + $18,000 = $252,000

39.) A company had a gross margin of $100,000, cost of goods sold of $70,000, and Selling and Administrative expenses of $45,000. Net operating income (loss) was:

Net operating income = Gross margin - Selling & Administrative expenses: $100,000 - $45,000 = $55,000

35.) Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing?

The salary of the manager at a hair salon

41.) Given the following, calculate total manufacturing costs: Direct materials cost: $62,000 Direct labor cost: $78,000 Manufacturing overhead applied: $46,000 Actual manufacturing overhead: $51,000 Beginning Work in process inventory: $32,000 Ending Work in process inventory: $35,000

Total manufacturing costs = $62,000 + $78,000 + $46,000 = $186,000. Adjust for work in process when calculating the cost of goods manufactured

38.) The formula to calculate cost of goods manufactured is:

Total manufacturing costs charged to jobs + beginning work in process inventory - ending work in process inventory

5.) True or False: One reason to use a predetermined overhead rate is to eliminate the effect of seasonal factors.

True

59.) True or False: Underapplied or overapplied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels.

True

7.) An ideal allocation base should be

a cost driver

6.) A cost driver is:

a factor that causes overhead cost to occur

The United States requires absorption costing for: a. external financial reports b. internal financial reports c. tax reports

a. external financial reports c. tax reports

52.) A bill of materials contains the: (Check all that apply) a. type of each direct material needed to complete a unit of product b. the quantity of materials to be drawn from the storeroom c. type of materials to be drawn form the storeroom d. job that will be charged for the cost of the materials e. quantity of each direct material needed to complete a unit of product

a. type of each direct material needed to complete a unit of product e. quantity of each direct material needed to complete a unit of product

24.) An event that causes the consumption of manufacturing overhead resources is referred to as a(n) _________.

activity

58.) A "bucket" in which costs are accumulated that relate to a single activity is called a(n) _________.

activity cost pool

51.) An allocation base that is used as the denominator for an activity cost pool is called a(n) __________.

activity measure

40.) Overhead is underapplied if ________.

actual overhead is more than applied overhead

12.) The purpose of manufacturing overhead incurred account is to accumulate:

all manufacturing overhead costs as they are incurred during a period

25.) A measure such as direct labor-hours or machine-hours used to assigned overhead costs to products and services is called a cost driver or a(n) ___________ ___________.

allocation base

45.) The process used to assign overhead costs to products is called overhead ________.

application

68.) Actual manufacturing overhead costs are recorded in the Manufacturing overhead account:

as they are incurred

56.) How are manufacturing cost that cannot be traced to a particular product assigned to products and services? a. By adding a markup to direct labor costs b. By averaging across time and across products c. By determining how much of the cost was actually caused by a particular product

b. By averaging across time and across products

37.) Why have direct labor costs decreased relative to overhead as a component of product costs? (select all that apply) a. Labor has become more unionized b. Production processes have become more automated c. Products have grown more sophisticated and complex d. More full-time labor is being used

b. Production processes have become more automated c. Products have grown more sophisticated and complex

3.) The predetermined overhead rate is multiplied by the actual allocation base incurred by a job to find: a. actual overhead b. overhead applied to the job c. the predetermined overhead rate for the job d. the total cost of the job

b. overhead applied to the job

53.) Costs related to purchase-orders and setting up equipment are examples of _____________ activities

batch level

1.) The predetermined overhead rate is calculated:

before the period begins

63.) Cost of goods sold is calculated as:

beginning finished goods inventory + cost of goods manufactured - ending goods inventory

27.) Cost of goods manufactured = total manufacturing costs charged to job + _______ work in process inventory - _______ work in process inventory

beginning; ending

26.) In a system that uses multiple predetermined overhead rates, overhead is applied: a. before production begins b. at the end of each period c. in each department as jobs proceed through the department d. at the end of the total production process c. in each department as jobs proceed through the department

c. in each department as jobs proceed through the department

22.) A job cost sheet contains: (select all that apply) a. selling costs charged to the job b. the selling price of the job c. materials costs charged to that job d. manufacturing overhead costs charged to the job e. labor costs charged to the job

c. materials costs charged to that job d. manufacturing overhead costs charged to the job e. labor costs charged to the job

21.) The formula to calculate unadjusted cost of goods sold using the direct method is:

cost per unit times the number of units sold

17.) A predetermined overhead rate is calculated by dividing the _____ total manufacturing overhead by the _____ total amount of the allocation base.

estimated; estimated

67.) Which of the following is NOT a criticism of basing predetermined overhead rates on budgeted activity instead of capacity when there is a significant amount of fixed overhead?

if budgeted activity increases, overhead assigned to products will be too low

46.) The overhead entered on the job cost sheet _______ the actual amount of overhead caused by the job.

is not

20.) Manufacturing overhead consists of all:

manufacturing costs other than direct labor and direct materials

61.) Direct materials costs are recorded on the job cost sheet when the:

materials are issued to the job

28.) The difference between overhead applied to work in process and actual overhead is:

overapplied or underapplied overhead

44.) To keep track of labor time and costs, many firms have replaced:

paper time tickets with computerized systems

42.) Design and making engineering design changes are examples of __________ activities

product level

57.) Total manufacturing overhead costs tend to:

remain fairly constant

48.) The document used to record the time workers spend on each job and task is called:

time ticket